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THE PRESIDENTIAL CAMPAIGN has brought “democratic socialism” out of the shadows of fringe ideologies and into the spotlight of mainstream American politics. Is socialism seriously still in play? Didn’t the horrors of the 20th century finally bury that ideological monstrosity?

No, that’s communism you’re thinking of. To quote the Democratic Socialists of America (DSA): “Socialists have been among the harshest critics of authoritarian Communist states. Just because their bureaucratic elites called them ‘socialist’ did not make it so; they also called their regimes ‘democratic.’”

If the communists weren’t really socialists, then what the heck does socialism mean?

The basic definition of socialism, democratic or otherwise, is collective ownership of the means of production. The DSA website says: “We believe that the workers and consumers who are affected by economic institutions should own and control them.”

But the DSA keeps the emphasis on democracy:

Democratic socialists believe that both the economy and society should be run democratically—to meet public needs, not to make profits for a few. To achieve a more just society, many structures of our government and economy must be radically transformed through greater economic and social democracy so that ordinary Americans can participate in the many decisions that affect our lives.

Socialism, then, as the democratic socialists understand the term, is just the logical consequence of the democratic ideal: “Democracy and socialism go hand in hand. All over the world, wherever the idea of democracy has taken root, the vision of socialism has taken root as well.”

On this point, at least, many in America’s free-market tradition would agree.

Anti-democratic Anti-socialists

Ludwig von Mises may have been the most radical classical liberal in 20th-century Europe, but when he came to the United States, Mises found himself at odds with American libertarians who felt that his liberalism didn’t go far enough.

Mises had defended both capitalism and democracy in his book Liberalism. American libertarians such as R.C. Hoiles and Frank Chodorov shared Mises’s appreciation of the free market but were far less sanguine about majority rule. The harshest language came from Discovery of Freedom author Rose Wilder Lane:

As an American I am of course fundamentally opposed to democracy and to anyone advocating or defending democracy, which in theory and practice is the basis of socialism.

It is precisely democracy which is destroying the American political structure, American law, and the American economy, as Madison said it would, and as Macauley prophesied that it would do in fact in the 20th century. (Letter from Lane to Mises, July 5, 1947; quoted in Mises: The Last Knight of Liberalism)

Why would Lane argue that democracy is “the basis of socialism”?

Majority Fools

Voting turns out to be a particularly bad way to make economic decisions. Mancur Olson’s book The Logic of Collective Action wouldn’t appear for another 18 years, but some version of his thesis was probably already familiar to Lane and her radical allies. Olson argues that majority rule separates the benefits and the costs of decision-making.

Elections aren’t just a poll of everyone’s opinion; they are organized campaigns by different groups fighting for their interests. A voter doesn’t go into the booth having studied the controversy in question. He or she brings to the polls an impression of an issue based on how different organized groups have presented their cause during massive advocacy campaigns prior to Election Day. Every such campaign is a case of a special-interest minority trying to persuade a voting majority.

Elections aren’t just a poll of everyone’s opinion; they are organized campaigns by different groups fighting for their interests. And it’s not a level playing field, to borrow one of the political Left’s favorite metaphors.

And it’s not a level playing field, to borrow one of the political Left’s favorite metaphors. Olson explains how the incentive for group action decreases as the size of a group increases, meaning that bigger groups are less able to act in their common interest than smaller ones. Small groups can gain concentrated benefits while the rest of us face diffuse costs.

The textbook example is sugar tariffs (“or what amounts to the same thing in the form of quota restrictions against imports of sugar,” as former Freeman editor Paul Poirot put it). Why is Coke sweetened with corn syrup in the United States and with sugar everywhere else in the world? Because sugar is cheaper everywhere else, while the U.S. government keeps sugar artificially expensive for Americans. The protections responsible are a huge benefit to a small group of domestic sugar producers (and, as it turns out, also to corn growers) and a burden on the rest of us.

Ignore the corn-syrup issue for a moment and pretend that Coke is still made with sugar. Let’s imagine that government price supports make each can of Coke, say, 5 cents more than it otherwise would be. That difference adds up, but at the moment you’re buying the can of soda, it’s an irritation, not a hardship. Even if you bother to figure out how much extra money you have to spend on sweet drinks each year, the figure probably won’t be enough to stir you to petition the legislature to repeal the sugar lobby’s protections. In fact, the loss isn’t even enough to prompt you to learn the cause of the higher price.

That’s what economists mean when they talk about diffuse costs. (And the Coke drinker’s very reasonable cluelessness about the cause of his lost nickel is what economists call “rational ignorance.”)

On the other hand, the sugar producers will make billions from lobbying and campaigning to explain why their favorite barriers are good for the economy.

Take this example and multiply it by all the special interests seeking government favors. Even if you do understand what’s going on, even if you know how this hurts the economy and consumers and yourself, it’s not like there’s ever one plebiscite, a big thumbs-up or thumbs-down for free trade in sugar. Every issue is addressed separately, and every issue faces the same logic of collective action we see in the case of the sugar. (And as with the case of sugar, where the corn industry has its own interests in promoting higher sugar prices, many issues have multiple special-interest groups with their own reasons for supporting socially harmful policies.)

Now replace agribusiness in this example with teachers unions or the AARP or anyone else who benefits from a government program, even if that program hurts the rest of us.

The democratic system is rigged from the outset to favor ever more interference from ever-bigger government. From this perspective, Rose Wilder Lane doesn’t seem quite so polemical for equating democracy and socialism.

Democratic Socialists for Crony Capitalism

But is big government the same thing as socialism? The DSA denies it. They insist that they prefer local and decentralized socialism wherever possible. How long an elected socialist would keep his hands off the bludgeon of central power is a reasonable question, and a chilling one, as is the question of how long a socialist democracy would honor the civil liberties that the DSA claims to support.

But even if we reject the DSA’s claims as either naive or fraudulent, there is still a compelling reason to reject the equation of big government and socialism.

Government doesn’t grow to serve the poor or the proletariat. Democracy spawns special interests, and special-interest campaigns require deep pockets. None come deeper than the pockets of established business interests.

Government doesn’t grow to serve the poor or the proletariat. Democracy spawns special interests, and special-interest campaigns require deep pockets. None come deeper than the pockets of established business interests.

Real-world capitalists, despite the rhetoric of the socialists, rarely support capitalism—at least not in the sense of free trade and free markets. What they too often support is government protection and largess for themselves and their cronies, and if that means having to share some of the spoils with organized labor, or green energy, or the welfare industry, that’s not a problem. Corporate welfare flows left and right with equal ease.

“Democratic socialists,” according to the DSA, “do not want to create an all-powerful government bureaucracy. But we do not want big corporate bureaucracies to control our society either.”

If that’s true, then democratic socialists should aim to reduce both the size of government and the scope of democratic decisions. Unfortunately, they’re headed in the opposite direction—and trying to drag the rest of us with them.

Mr. Marcus is editor of The Freeman, from which this article is reprinted with permission.